The UAE Cabinet has approved a substantial revision to the country’s administrative tax penalty regime. Cabinet Decision No. 129 of 2025 amends the penalty framework first introduced under Cabinet Decision No. 40 of 2017 and later updated by Cabinet Decision No. 108 of 2021, reducing several key penalties and aligning enforcement across Value Added Tax (VAT), Excise Tax, and Corporate Tax.
For businesses operating in the UAE, this is one of the most consequential compliance updates since the introduction of Corporate Tax, and it comes with a clear compliance deadline that every finance team should have on its radar.
This article from KGRN Chartered Accountants sets out exactly what has changed, when it takes effect, and what businesses should do before the new rules apply.
Key Takeways:
- Cabinet Decision No. 129 of 2025 was issued by the UAE Cabinet on 9 October 2025, published on 11 November 2025, and came into effect on 14 April 2026.
- It amends the administrative penalties under the Tax Procedures Law (Federal Decree-Law No. 28 of 2022) and aligns them with the penalty structure already in place for Corporate Tax under Cabinet Decision No. 75 of 2023.
- Several penalties have been reduced, and the penalty for late payment of tax has moved from a compounding structure to a flat annualized rate of 14%, calculated monthly.
- Penalties for Voluntary Disclosures have been significantly lowered, reinforcing the FTA’s push toward proactive, pre-audit correction of errors.
- Penalties specific to VAT (Table 3) and Excise Tax (Table 2) violations remain unchanged; only the general Tax Procedures Law penalties (Table 1), which apply across all tax types, have been revised.
- Businesses have until 14 April 2026 to review their compliance processes ahead of the new framework.
Why This Decision Matters
Since the UAE introduced Excise Tax in 2017, VAT in 2018, and Corporate Tax in 2023, the administrative penalty framework has been amended in stages first under Cabinet Decision No. 49 of 2021, then Cabinet Decision No. 108 of 2021. Cabinet Decision No. 129 of 2025 is the latest, and most comprehensive, revision to date.
The decision also updates legislative references throughout the penalty framework, replacing mentions of the former Federal Law No. 7 of 2017 on Tax Procedures with Federal Decree-Law No. 28 of 2022 on Tax Procedures, aligning the terminology and structure with the procedural rules the Federal Tax Authority (FTA) currently applies.
According to the government’s own stated objective, the amendments are designed to simplify penalty calculations, improve proportionality between the violation and the fine, increase transparency, and encourage voluntary compliance rather than to punish taxpayers who come forward and correct their own errors.
What Cabinet Decision No. 129 of 2025 Changed:
The most significant amendments are to Table 1 of Cabinet Decision No. 40 of 2017, which covers violations under the Tax Procedures Law and applies uniformly across VAT, Excise Tax, and Corporate Tax. Table 2 (Excise Tax-specific violations) and Table 3 (VAT-specific violations) have not been changed under this decision.
Here is a comparison of the key revised penalties:
| Violation | New Penalty (from 14 April 2026) | Previous Penalty |
| Failure to submit tax-related data, records, or documents in Arabic when requested by the FTA | AED 5,000 | AED 20,000 |
| Failure to inform the FTA of changes to tax record information | AED 1,000 per violation; AED 5,000 for a repeat violation within 24 months of the last violation | AED 5,000 for the first violation; AED 10,000 for repetition |
| Failure of the Legal Representative to inform the FTA of their appointment | AED 1,000 | AED 10,000 |
| Failure to settle tax payable stated in a Tax Return, Voluntary Disclosure, or Tax Assessment | Flat annualized rate of 14%, calculated monthly (approx. 1.17% per month) | Fixed 2% penalty the day after the due date, plus 4% monthly thereafter (compounding, capped at 300%) |
| Submission of an incorrect Tax Return | AED 500, unless corrected before the due date or through a Voluntary Disclosure | AED 1,000 for the first instance; AED 2,000 for repetition |
| Submission of a Voluntary Disclosure | 1% per month on the tax difference | Tiered penalty ranging from 5% to 40% |
| Failure to submit a Voluntary Disclosure before being notified of a Tax Audit | Fixed penalty of 15%, plus 1% monthly on the tax difference (time-based, until disclosure or assessment) | Fixed penalty of 50% on the amount of error, plus 4% monthly on unpaid tax or ineligible refund |
Source: Comparative analysis of Cabinet Decision No. 129 of 2025 against Cabinet Decision No. 108 of 2021, as published by the UAE Federal Tax Authority.
What has not changed:
It is equally important for businesses to understand what the decision leaves untouched:
- Registration and deregistration penalties for VAT, Excise Tax, and Corporate Tax remain the same. This signals that the FTA continues to expect strict discipline around EmaraTax portal obligations, since registration and deregistration compliance sits at the foundation of the tax system.
- VAT-specific penalties (Table 3) and Excise Tax-specific penalties (Table 2) are unchanged. Only the general Tax Procedures Law penalties in Table 1 which apply across all three tax regimes have been revised.
Why the Voluntary Disclosure Changes Stand Out
The most notable shift in this decision is the treatment of Voluntary Disclosures. Under the previous framework, a business that identified and disclosed its own error before an FTA audit still faced a steep fixed penalty of 50% of the error amount, plus a 4% monthly charge. Under Cabinet Decision No. 129 of 2025, that fixed penalty drops to 15%, plus a lower 1% monthly charge.
This is a deliberate policy signal: the FTA wants to reward businesses that self-correct early rather than wait to be caught in an audit. In practical terms, it gives finance and tax teams a strong incentive to review historical filings now, while the current (higher) penalty structure is still in force, or to be ready to disclose promptly once the new, lower rates apply from 14 April 2026.
How KGRN Can Help:
Navigating a penalty framework transition across VAT, Excise Tax, and Corporate Tax requires more than a summary of the new numbers; it requires a review of your specific filing history, outstanding liabilities, and disclosure obligations against both the current and upcoming rules.
KGRN Chartered Accountants’ tax advisory team supports businesses across the UAE with Corporate Tax, VAT, and Tax Procedures compliance reviews, Voluntary Disclosure assessments, and FTA representation.
If your business has open compliance items that could be affected by this transition, speak with KGRN’s tax advisory team.
Frequently Asked Questions:
- What is Cabinet Decision No. 129 of 2025?
It is a UAE Cabinet decision that amends the administrative penalties applicable to violations of the Tax Procedures Law, and consequently affects penalty calculations across VAT, Excise Tax, and Corporate Tax. It replaces the penalty structure set out in Cabinet Decision No. 108 of 2021. - Does this decision reduce all UAE tax penalties?
No. It revises the penalties under Table 1 of Cabinet Decision No. 40 of 2017 (Tax Procedures Law violations), which apply across all tax types. Penalties specific to VAT (Table 3) and Excise Tax (Table 2) remain unchanged, as do registration and deregistration penalties. - How much has the Voluntary Disclosure penalty changed?
Previously, failing to submit a Voluntary Disclosure before being notified of a Tax Audit carried a fixed penalty of 50% of the error amount plus 4% monthly on unpaid tax. Under the new framework, this becomes a fixed 15% penalty plus 1% monthly on the tax difference. - How is the late payment penalty calculated under the new rules?
Late payment of tax stated in a Tax Return, Voluntary Disclosure, or Tax Assessment is now subject to a flat annualized rate of 14%, calculated on a monthly basis (approximately 1.17% per month), replacing the previous compounding structure of a 2% fixed penalty plus 4% monthly, capped at 300%.
